How does Nifty Derivatives affect Nifty Pricing?

I have a general question on the Nifty and F&O.

How does Nifty basically move up/down? It usually depends on the stock movement and its weightage. Let’s say reliance has highest weigthage and if reliance moves 10 points up than nifty may move 30 points up.

Now coming back to my question, let’s say if someone is buying an Nifty future of 100 lots and if other person buying 100 lots of call option ITM/ATM how does it affect nifty?

For Eg- people always predict the expiry based on the options writing and i want to know how exactly it works out? since the nifty movement is always based on the stock movement. Does it even matter where the call/put writing is happening?

Also how does it matters if let’s say FII buy nifty futures worth so some 1000 crores? At the end if the stock goes up than only nifty goes up right?

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It should not effect nifty spot ideally, if more are buying futures then future may be quoting at premium to spot.

Yeah, big institutions may then act in spot trading so that nifty will withhold these levels, we can’t prove this or at least I can’t but that’s what is told.

Again it adds to sentiment that they are bullish on nifty and many may turn to spot trading, also FIIs on other side can be buying in spot.


Are you talking about max pain theory?

Not exactly, i am trying to find significance of spot vs derivative trading. Irrespective of call/put selling inorder for the index to go up the underlying asset(stock) needs to go up/down.

So let’s say you are an large investor and for eg- say you are investing around 100cr. You could easily buy HDFC and ICICI bank spot and rest 1CR you can buy an option and you can be sure that if there is an investment in SPOT the future and option price will move in your direction and you can make good money and later exit from everything.

Edit - I know its not as simple as i said but the logic should work technically.

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Daily trading value of hdfcbank is around 2k crores
If one is buying calls first and buying spot next makes a sense,if the person has 100cr.
But i think they will be questioned by exchanges/regulators if they kept market orders with that huge value.(Me too don’t know anything about it,hard construction from 05/10/2012 market order event)


yes derivatives move in tandem with the underlying now why do people analyze so much in derivative rather than stock? why bother about options OI, max pain PCR when one has to more closely observe what the stock is doing and where could the stock end?

What i mean is maximum analysis should be done on stock which inturn says what will happen in the derivative world. Analyzing the derivative data is just the speculation on what could happen to the spot price isn’t it?

Thanks i was wondering if i am understanding things differently. I was building an options indicator where some of these data helps in limited time frame mostly intraday but i cannot rely on this data if its a longer time frame. I might have to tweak a lot to make it work :slight_smile:

I found nothing but since higher volume is in derivatives compared to underlying, it is quiet logical that the latter is affected by the former.

Lets assume a hypothetical situation where nifty has zero volume while nifty derivative has its normal volume (in real as well nifty has much lower volume than nifty derivatives, in particular f&o). Then how would the f&o affect spot, to be particular, say if spot is at 11500 and 11700CE is rising in price? @Gautam @siva @Srinivas_Ramakrishna @maddy_Des

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The price of F&O has no effect on price of Underlying. Futures and Options themselves are derivatives which derive their price from underlying, it is not the other way around.

The price of F&O will diverge from underlying and trade at premium or discount due to some reasons but doesn’t matter how much F&O diverge in price compared to underlying, upon expiry the contracts are settled at closing price of underlying only.

The price or buying and selling of derivatives of a particular stock or index doesn’t affect the price of the underlying rather derivatives price are based and derived from the underlying…

Futures and options are mainly introduced for hedging …but now they are mostly preffered for trading than stocks because they provide leverage…

Why we buy or sell a stock…because according to our TA And FA… it may either go down or go up… Right… So it all base on sentiments either bullish or bearish… Now we have two options …either we can buy or short Stocks itself or do the same with derivatives…

And buying or selling derivatives is all about playing with the sentiment of the underlying asset…in near future…

This is my options… I would like if anyone correct me if i am wrong…i always appreciate that​:pray::pray::pray:.


sounds pretty logical to me, although i’m far from an expert. thanks for response

By definition, agreed, but do you really mean derivatives can be anywhere independent of underlying, and at expiry they must be at their defined price?

Yes, the underlying and derivative won’t diverge way far from each other but they do during volatile times, and by the end of expiry both will converge and derivatives will be settled at closing price of the underlying.

You won’t have to look far beyond, you can check for March / April, Nifty and Bank Nifty Futures prices and you will get the idea. you can find all the historical data on NSE website.

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Thanx. It explained all @ShubhS9

Does anyone here know how to select specific columns of an excel and make graph with it?